SweetFrog Logo

SweetFrog

MTY Franchising USA, Inc.
https://www.sweetfrogfranchising.com
1-480-362-4800
9311 E. Via De Ventura, Scottsdale, Arizona 85258

Initial Investment Range

$111,350 to $658,500

Franchise Fee

$13,500 to $58,000

As a franchisee, you will operate a restaurant called sweetFrog which offers frozen yogurt and other frozen dessert products customarily using a self-serve delivery format on a take-out or eat-in basis.

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SweetFrog March 28, 2025 FDD Risk Analysis

Free FDD Library AI Analysis Date: July 16, 2025

DISCLAIMER: Not Legal Advice - For Informational Purposes Only. Consult With Qualified Franchise Professionals.

1

Franchisor Stability Risks

Start Here
Total: 10
3
3
4

Disclosure of Franchisor's Financial Instability

High Risk

Explanation

The 2024 audited financial statements for MTY Franchising USA, Inc. (MTY USA) show a net loss of over $12.5 million, a significant decline from a $16.9 million net income in 2023. The loss was driven by over $44 million in impairment charges on assets and goodwill, suggesting the value of its brands may be declining. This financial performance could potentially impact its ability to support franchisees and invest in the system.

Potential Mitigations

  • A franchise accountant should meticulously review the franchisor's complete audited financial statements, including all footnotes and the auditor's opinion.
  • Discuss the franchisor's current financial condition and the reasons for the recent net loss and asset impairments directly with their management.
  • Your attorney can help you understand any disclosed risks related to the franchisor's financial condition, particularly any 'going concern' notes.
Citations: Item 21, Exhibit V

High Franchisee Turnover

High Risk

Explanation

The FDD discloses a significant and consistent decline in the number of franchised outlets over the last three years, with a net loss of 32 units. The Minnesota state addendum explicitly flags a high turnover rate, noting 41 outlets (over 16% of the system) ceased operations or were not renewed during this period. This level of churn is a critical indicator of potential systemic issues, which could include franchisee unprofitability or dissatisfaction with the system.

Potential Mitigations

  • It is imperative to contact a substantial number of former franchisees listed in Item 20 to understand their reasons for leaving the system.
  • Your accountant should analyze the turnover data from Item 20 tables to calculate the precise annual churn rate.
  • A business advisor can help you assess whether this high turnover rate presents an unacceptable risk to your potential investment.
Citations: Item 20, Exhibit A

Rapid System Growth

Low Risk

Explanation

The franchise system is not experiencing rapid growth; rather, it is shrinking. Item 20 data tables show a consistent net decrease in the total number of franchised outlets over the past three fiscal years. Therefore, the specific risks associated with a franchisor's support infrastructure being strained by overly rapid expansion were not identified.

Potential Mitigations

  • Your business advisor can help you analyze the implications of a shrinking system on brand recognition and market presence.
  • Ask the franchisor about their strategy to reverse the trend of net outlet decline and support existing franchisees.
  • An accountant can review the financials to see how the declining unit count correlates with the franchisor's revenue and profitability.
Citations: Item 20

New/Unproven Franchise System

Low Risk

Explanation

The sweetFrog system, founded in 2009 and acquired by the current franchisor in 2018, has a long operational history and is not a new or unproven franchise. The risk of investing in a startup system with underdeveloped support and minimal brand recognition was not identified in the FDD.

Potential Mitigations

  • Investigate the brand's current reputation and market relevance in your specific area with help from a business advisor.
  • Ask your attorney to review the history of the brand under its current and previous owners to understand its evolution.
  • Speak with long-term franchisees about their experience and the system's stability over time.
Citations: Item 1, Item 2, Item 20

Possible Fad Business

Medium Risk

Explanation

The self-serve frozen yogurt industry has experienced cycles of rapid growth followed by market saturation. While sweetFrog is an established brand, the business model's long-term consumer demand could be sensitive to shifting dessert trends. The consistent decline in the number of outlets, as shown in Item 20, may suggest that the market is mature or contracting, which could present a risk to future growth potential.

Potential Mitigations

  • A business advisor can help you conduct independent market research to assess the long-term demand for self-serve frozen yogurt in your specific area.
  • Ask the franchisor about their strategies for product innovation and adaptation to evolving consumer preferences.
  • Consult with your accountant to model a financial plan that considers potential fluctuations in market trends.
Citations: Item 1, Item 20

Inexperienced Management

Low Risk

Explanation

The franchisor's management team, as detailed in Item 2, possesses extensive experience in the restaurant and franchising industries, primarily through their roles at parent and affiliate companies like MTY Food Group and Kahala Brands. The risk associated with an inexperienced management team lacking the knowledge to operate a franchise system effectively was not identified.

Potential Mitigations

  • When speaking with current franchisees, inquire about their direct experiences with the management team's competence and support.
  • A business advisor can help you research the public track record of the executives listed in Item 2.
  • During your own interactions, assess the professionalism and knowledge of the franchisor's leadership team.
Citations: Item 2

Private Equity Ownership

Medium Risk

Explanation

The franchisor, MTY USA, is part of a very large, publicly-traded portfolio company, MTY Food Group, that owns dozens of competing and non-competing restaurant brands. This structure can create risks similar to private equity ownership, where decisions may prioritize overall corporate financial performance over the specific needs of sweetFrog franchisees. This could manifest in resource allocation, support levels, or the placement of other company-owned brands near your location.

Potential Mitigations

  • Your business advisor should help you research the parent company's reputation and its management history with other brands in its portfolio.
  • During franchisee interviews, ask about any perceived changes in support or strategy related to being part of a large brand portfolio.
  • Your attorney can help clarify the complex corporate structure and how it might impact your specific agreement.
Citations: Item 1, Item 12

Non-Disclosure of Parent Company

Low Risk

Explanation

The FDD clearly discloses the franchisor's parent and ultimate parent companies in Item 1. Furthermore, audited financial statements for the direct franchisor entity, MTY USA, are provided in Item 21. The specific risk of a franchisor failing to disclose its parent company or withholding necessary financial statements was not identified.

Potential Mitigations

  • Your accountant should confirm that the provided financial statements are for the correct legal entity you are contracting with.
  • It is advisable for your attorney to verify if any guarantees from the parent company are offered and if they are legally binding.
  • Ensure you understand the relationship between the franchisor and its parent company by discussing it with your business advisor.
Citations: Item 1, Item 21

Predecessor History Issues

Medium Risk

Explanation

The FDD discloses that the sweetFrog brand was acquired from a predecessor, SFF, L.L.C. Item 3 reveals litigation against this predecessor by a former franchisee alleging fraud, which resulted in a significant settlement payment of $300,000 to the franchisee. This indicates there may be historical issues with the system's sales or operational practices that predate the current ownership and could have lingering effects.

Potential Mitigations

  • Discuss the implications of the predecessor's litigation history with your franchise attorney.
  • When speaking with long-term franchisees, ask about their experiences under the previous ownership to understand the system's history.
  • A business advisor can help you assess whether the current franchisor has adequately addressed any inherited systemic problems.
Citations: Item 1, Item 3

Pattern of Litigation

High Risk

Explanation

Item 3 discloses a significant amount of litigation involving the franchisor's parent and affiliate companies against their franchisees. Critically, it also includes a case against the sweetFrog predecessor where a former franchisee alleged fraud and received a $300,000 settlement. This history suggests a potentially litigious environment and raises concerns about the franchisor's past business practices and relationships with its franchisees, which presents a notable risk.

Potential Mitigations

  • Your franchise attorney must carefully review the nature, frequency, and outcomes of all disclosed litigation.
  • It is highly recommended to contact franchisees, particularly former ones, to discuss their experiences and the context of any disputes.
  • Consider the litigation history as a key indicator of the franchisor's culture and relationship with its franchisees with your business advisor.
Citations: Item 3
2

Disclosure & Representation Risks

Total: 15
6
1
8

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

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3

Financial & Fee Risks

Total: 10
4
5
1

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

4

Legal & Contract Risks

Total: 16
6
7
3

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

5

Territory & Competition Risks

Total: 5
3
1
1

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

6

Regulatory & Compliance Risks

Total: 10
5
4
1

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

7

Franchisor Support Risks

Total: 4
2
2
0

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

8

Operational Control Risks

Total: 12
4
6
2

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

9

Term & Exit Risks

Total: 18
7
8
3

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.

10

Miscellaneous Risks

Total: 2
2
0
0

Example Risk: Franchisee Financial Obligations

Blue Risk

Explanation

This risk involves the financial obligations that a franchisee must meet, including initial fees, ongoing royalties, and other required payments. Understanding these obligations is crucial for long-term success.

Potential Mitigations

  • Carefully review the Franchise Disclosure Document (FDD) and consult with a franchise attorney to fully understand all financial commitments before signing.
  • Conduct regular risk assessments
  • Implement monitoring and reporting systems

Unlock Full Risk Analysis

Purchase the complete risk review to see all 102 risks across all 10 categories.